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Pfizer (PFE) reported fourth-quarter earnings on Tuesday that nearly quadrupled from a year ago as revenue rose 6%, thanks to products from the Wyeth acquisition. The world's biggest drugmaker also lowered its sales guidance for 2012, which at first sent shares lower. But the announcement of a new $5 billion share buyback program, as well as planned spending cuts, turned sentiment around. By noon, Pfizer shares were up more than 6%.

Pfizer said it intends to cut R&D expenses in 2012 by $1.5 billion, to between $6.5 billion to $7 billion. It recorded $9.4 billion in R&D expenses for 2010. Pfizer will exit a major research and development center in England -- where Viagra was discovered -- within two years, laying off most of its 2,400 employees. Pfizer, which experienced several research setbacks lately, also plans to halt its efforts in certain therapeutic areas, including allergy, urology, respiratory, internal medicine and tissue repair.

Looking ahead, the New York-based company predicts full year 2011 earnings of $2.16 to $2.26 per share, below the consensus of $2.30 per share, and revenue of $66 billion to $68 billion, compared to analysts' estimates of $66.55 billion.

Because of the R&D spending cut, Pfizer expects 2012 earnings per share, excluding items, of $2.25 to $2.35, compared to analyst profit forecast of $2.22 per share. But the revenue picture is quite different.

In November, Pfizer's $10 billion-a-year drug, the cholesterol fighter Lipitor, will lose patent protection in the U.S. For 2012, the first full year Pfizer will feel the effect of competition from cheaper generics, it lowered its sales guidance to a range of $63 billion to $65.5 billion from the prior target of $65.2 billion to $67.7 billion. Already in the fourth quarter, sales of the the world's best-selling drug declined by 17% as it lost patent protection in some markets.
Industry-wide, Guidance Is Dropping

Pfizer is not alone. Last week, British pharmaceutical AstraZeneca (AZN) said: "It is recognised that the coming years will be challenging for the industry and for the Company, as its revenue base transitions through a period of exclusivity losses and new product launches." Astra, which also launched a $4 billion share buyback program, lowered its 2011 revenue guidance. Bristol-Myers Squibb (BMY) issued 2011 guidance that was below analyst expectations on low- to mid-single-digit revenue growth.

Eli Lilly (LLY), whose top-selling antipsychotic drug, Zyprexa, faces generic competition this year, forecast full-year 2011 earnings will decline on flat to slightly higher revenue growth. And Swiss drugmaker Novartis (NVS) said that while it expects double digit sales growth in 2011 for the group, pharmaceutical sales are expected to be lower as it faces patent expirations in some markets for heart drug Diovan and cancer drug Femara.

One pharmaceutical after another either lowered guidance or issued disappointing outlook for 2011 as the patent cliff shifts into higher gear and companies face price pressures in the U.S and Europe. Without pipelines sufficiently full of new drugs to offset lower sales of older blockbusters, companies have been looking to expand to emerging markets, expand into other business areas such as generics, reorganize R&D, outsource research, and acquire companies with potential winners under development. Whether these measures will be enough remains to be seen.